FNHC - Earnings call transcript Q1 2022

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Operator

Good morning, and welcome to FedNat Holding Company's First Quarter 2022 Conference Call. My name is Howard, and I'll be your conference operator this morning. At this time, all participants will be in listen-only mode.

Before we begin today's call, I'd like to remind everyone that this conference call is being recorded as well as broadcast live via webcast.

Additionally, today's call will be available via webcast replay later this afternoon and accessible by visiting the Investor Relations section of FedNat's website at www.fednat.com.

turn Relations. over to for Bernie like Investor FedNat's I'd the to call Kilkelly Now Bernie?

Bernie Kilkelly

and for morning, Good thanks conference quarter call. XXXX joining FedNat's first

non-GAAP comparison operating release such greater non-GAAP transparency earnings and more remarks year's provide references Our meaningful, results. a efficient prepared measures to as prior We income. to adjusted and use to these include measures,

limited estimate, as are this statements and being not that forecasted statements differ from these what words measures time but uncertainties is in the forward-looking results due realized. press call intended Our non-GAAP predict, described this statements. anticipate, phrases our uncertainties are our identify risks measures forward-looking are this based -- uncertainties, and our Actual expect, forward-looking in including on similar on in are may time. SEC and risks call, forward-looking or project such to, release. and may to on that that non-GAAP or historical outcomes current statements. other conference The management and and reconciliations not discussed call issued to the from from to matters filings with numerous involving are the are facts expectations made conference materially made Company yesterday other expectations expressed risks this call available result the the by in to earnings GAAP Statements release events, Words on and in not

any to new conference or any to today's and events disclaims date, made statements otherwise. obligation during of reflect this revise or FedNat Forward-looking speak call future as only statements information, update specifically forward-looking

Chief to the turn Mike over Now Braun. I FedNat's Executive Officer, will call

Mike Braun

the our Ron on my into welcome me quarter be we'll Accounting of to After Chief some with quarter, today. and financial Good Jordan, Officer, remarks, to Fernandez, our Eric the you. call. go more Ron first Thank on detail glad Chief take and call are Financial then our the Officer; conference results morning, XXXX and will questions.

FNIC, result by I'm could XXXX. enable us our states, non-Florida significantly on force X, our to excess states The within loss other regulators then which our inhibits I of results, believe book holding books sorry, Florida the to business plan downgrade secondary that on additional to and coming mortgage proposed some into of maintain is of Demotech the plan We the loss Florida significantly we smaller it obtain If proposed Before had the plan Company longer our are OIR a year the I company or proposed action capital to of The the the Insurance becoming action of Regulation acceptable would be us much for of an other reinsurance OIR action its ability approved, XX. update Florida wanted requested trading our by the give appropriate the the A following policies result in Office Florida-only been insurance quarter business. a no by may an rating to of lack from our July XX smaller as July as impacted in review excess into plan carriers. proposed -- on It the in April in plan that first reinsurance beginning the Florida. also completing approved of result prevents markets. expected and rating in to reducing vacating of program submitted

it reviewed Florida outcome is being is plan OIR, provide will and action available. review Our by currently the of an the update we when the on

disappointed latest developments. with these course, We are, of

where FedNat the relationships. strong a to November, Company, on and where improving runoff the in significant XX including share, established have ago Maison of this capabilities of frequency company last announced As we to strong position exposure current be was strategy Florida, capital less our underwriting market years processing markets, results. therefore, rightsized to and refocus exit is claims would our and, agent financially transition, we to Insurance Upon our and volatility homeowners expect if and and our a non-Florida continue surplus stronger completion in underwriting market that to with approved, FedNat weather less we

quarter. Turning to the

by exiting. that million financial including losses in impacted we net results were million which losses, events with $XX from remaining non-Florida severe business, pertaining the are net the process to impacted of Our of catastrophe catastrophe Florida, $XX our weather in

ongoing of FNIC $XX with liquidity ended million Demotech downgrade company, the action OIR. driven led uncertain capital the outside quarter part outlook we the for primarily Florida weather losses, appropriate at holding at infusions losses, the capital and from to the first in underwriting levels the by and While with maintaining catastrophe by

January, Maison's to book planned our is the we XXXX. each written Maison's began Mason's of was Texas runoff non-Florida In expiration During effective nonrenewal as to policies through The continued those orderly of the to policies. third-party general policy. the managing begin rights SageSure our in policies. SageSure. we July policies Florida's on Maison's the non-renew non-renewing dates And renewal of underwriter, currently owns March, non-Florida our FNIC's began first quarter, Louisiana markets. insurance And exit from of appropriate operations part we

onto December SageSure these of business not have call we with discussed policies of SageSure last As states. March, partners book and FNIC the of reduction renew are coverage, accepting policyholders Texas such in affiliated to been carriers, coverage percentage high FedNat. in alternative began of the our to A our all accelerating offers that alternative in of in XXXX insurance making Louisiana conference on policyholders

the sorry, all by non-renewed if SageSure did FNIC. coverage accept quarter, the policies alternative that coverage. continue did -- in first extent policyholders To accept they to alternative the they be renewed the be not states would During the not I'm

all X the on renewed Beginning Mississippi; carrier FNIC. an in that June X Carolina, in not longer SageSure in Louisiana; and policies be will However, XXXX, and partner quarter. not beginning Alabama and alternative case renewed by is no July X, second here of the South in May Texas

Mississippi. and through policies in will our honoring they've all to Florida the commitments to stress and action of and written that Beyond commitment of FedNat's Carolina, the Texas, FedNat. past, of I OIR state the agents nonrenewal and the receive to that from on Louisiana, proposed and regulators will SageSure present policyholders, professional these South want actions, by plan policyholders service future our future already depend received FNIC Alabama status all same approval

and approximately past XXX,XXX more I environment force at in declined the but the until in the into our increased year. taken of business the homeowners XXXX, to the renewed and years, turn the XX% this fourth more give to quarter new of like doing now quarter compared in ratios the the more performance to restoring XX% FNIC's I rates book. $XXX these a details quarter's the importantly, compared homeowners XXXX to XX% over our of over our rate of higher loss first average book, improve XX by policy $XX XXX,XXX environment to our discuss business, call Most rates. increased from approximately compared quarter cost policies in by to a XXX,XXX which in on Florida by a same ago. during business Florida as of accurately premium Before helped first has the and March to adequacy From and increased increased we dropped the reflect to first the increase decided Ron the our by the XX Florida from at results, This trends attritional loss challenges, translates it as Florida Florida market actions March that its for ratio shift continues to This both refocus our first on to the non-Florida rates quarter policies the premium increases FNIC's over FNIC as including clearly positive higher renewal in action end market. demonstrates is book will book strategy briefly rate The of than XXXX, the result time to million year. quarter. reinsurance why have rate $XXX policies Florida markets shrink with XX% on first our exit in to We XXXX. per our of attritional last benefited experiencing Florida of costs. We are cumulative over the in us as and we period, dramatic to five underwriting actions year FNIC's in in

call I'll our quarter over Rob to financials. first on details the turn more for Now

Ron Jordan

everyone. morning, good and Mike, Thanks,

quota by including and catastrophe are these process and non-Florida is approximately from losses the quarter these South share at quarter Texas, million mentioned, by which were of storms running in that $XX $X impacted approximately related treaties net under accrual As revenues. were related Carolina. FNIC's books the handling losses, Company of the $XX.X results catastrophe reduced losses Florida, of business. million. by to were Mike of Gross large business from and Maison's claims are losses Louisiana events XX of gross $XX ceded million Approximately that primarily Aggregate of million losses affected of million our first off, $X book estimated book of XXXX first

the If indicates and in FedNat's impact hit income quarter development Company of approximately one tax the reserve result of that have would to recorded $X.XX Louisiana to operating losses for cat or In million adjusted it quarter the reserve our which been strengthening apply the then first net federal and adverse Laura, $X quarter August $X.X events per in operating of rate, million related to addition, share. the XXXX. of adjust approximately were Hurricane in

in first have change the XX.X% improved, ratios in refocus year's first XX.X% quarter. market, Florida reaching loss in XXXX of last our the on the With strategy to attritional quarter compared to

as our primarily a combined XXX% earn impact on of continue to to approximately the quarter quarter of a basis, increases reinsurance losses, benefit and XXX% comparable the of that into XX the by ratio loss driven year lower rate points, costs book. Excluding compared prior catastrophe decline first was of the XXXX excess in

management our disciplined exposure We have progress continued Florida make to strategy. on

our ago. Our March XX% XX policies down XXX,XXX count is at quarter value March down year and fourth a at over X% of of from sequentially XX% is book down Florida a ago. Florida XX total from policy year insured The from

our with recent have in Importantly, up higher rates cost caught largely we that years. business doing believe of our

a that premiums policy quarter, as point, execute of policies from discussed, XX will This gross quarter the of year. not impact count reflecting As we the policy take these last was year's at last offer we Florida of Outside increases. coverage, XX XX%, the began March price first quarter. the already decreased non-renewing to and December March SageSure Non-Florida second our first decreased runoff described written of non-Florida to from X% as Florida, down XX% in compared by in do proof XX count quarter of runoff XX% books continue first accelerate voluntarily while alternate XXXX Mike the as Mike.

Turning our above. consistent position. sheet now to capital of ratios in We maintained Monarch or surplus balance with RBC and Maison, XXX% National and

approximately ended decline reflecting the $XX the commitment a carrying our in of of million. liquidity maintained with of holding $XX increase such also the We quarter part appropriate actions. approximately March At of to the investments total $XXX liquidity investments total first with million of at quarter, Fed's We rate cash end value and $XX.X million, having the million XX. at in company following held we

a with over and the will the a Overall, portfolio with maintain bonds to rating securities And discipline to in has common invest preferred exposure composite of back continue in turn call our We A. of portfolio. handful liquid no the Mike. I credit to stock that, higher-quality

Mike Braun

ahead and take Ron. we'll go Thanks, questions. few you Operator, a if can

Operator

first comes Instructions] Ruth [Operator Financial of The question line Lenox the Services. Doug from comment from

Doug Ruth

it? you could tell offer there the could Eric, anything Is color more comments about else or and Ron plan? you about some us

Mike Braun

And for then taxing different Yes, a the has this we materially was XXXX. and us we hurricanes, a pain publicly impacted point. lot which can into has But Company. had share that have extended last very been negative at there's very five two years the clearly, not in challenging way. XXXX, In

once to can this smaller coming balance force. nothing trying And But at share meaningful with Florida. and trying to you OIR. there's just policies We're what the in again, we proactive Doug. to with do back also conversations a once adjust have sheet that we're is the to to back less to specific So again, point, Company

look we and more So that's giving time. objective at the information generally, appropriate forward to the

Doug Ruth

do then you back to And you from timetable have might a Okay. OIR? the hear when expect

Mike Braun

it's in hopefully, Yes, specific that's something weeks. I there's more I the coming can But don't publicly share would coming think months. no coming timetable. say, the we in

hot the the in it's we're for think again, time again, what OIR to and have is what proposing. I for once once does to Company, it looking with receptive take a comfortable But the to the And regulators that sure accomplish. been coming review, and item it's we're weeks. make

Doug Ruth

Okay. about about you're what thoughts special your What are see what up? And and the session what coming hearing? you

Mike Braun

Yes. It's a bit early.

know been industry $X of more, next very XXXX clearly, last combine in weeks. had years. you has and the And XXXX, has that we'll market obviously, it's the two of Florida losses, underwriting losses, number property So the when believe, an XXXX. challenging for massive about I billion combined, But

take count Our the shrink to Florida rates reaction and policy also up. has been to

focused come less up the on And our rate last drivers. a five think some cumulatively action of legislators years. that perhaps to are and the solution the So the rates XX% is trying with identifying up I are over about

are things mind. pricing their then community the reinsurance talk of to But Social Florida, Florida. of front come there's on that about inflation, and litigation, also -- the lens like their

So talk expanding there's purchased the Hurricane potentially the state, Florida reinsurance the from Cat that Fund. about we

well about weeks' in time two So know bit results max are. but weeks' the early, three what it's a we'll time,

Doug Ruth

what with just since changed how on Okay. relationship agents, of about that that really the focusing the homeowners state you're the having state and you're Florida and of And that the Florida? has now the

Mike Braun

for everyone community. dealing of Yes. very the It's lot very A them. in are inflation, to to and difficult it's Florida, difficult with people whole

they're their also So a lot massive And homeowner policies. on increases seeing being people price canceled. of seeing insurance are that they're

And difficult very difficult It's having very is are state a it's agents. exponentially. policyholders. this disruptive. trouble So People of company, lot the the finding coverage. It's on on is it's very insurance very a Citizens and unfortunate. growing

Doug Ruth

the that mean, might have XXXX amount reinsurance? time what then dollar XXXX, you like need you And for think to the you do a about period? I spend

Mike Braun

our a becomes That's is, when fixed you is that -- as Yes. a season, question it really shrink, a hurricane premium, there, becomes part for expense. of as it cost. And is it cost. really we fixed really, you terminology, through a Doug, variable go good well. correct But And spend after reinsurance ceded

significant and premium, dropped have over we year, stays policies cost So that significant flat. last yet really the

really impacted it's us. So

Over rate of the have we rolled through premium, about about policies $XXX in. million dropped last a lot XXX,XXX of year March, and increases also

basis. the And a to of our I this you program. reinsurance there's So it's success much can us a need that smaller we much big rather better work difficult for but And up when opportunity we of once I don't aggressive a for program year as much million. it on was set quantify, a go-forward you approximately drop premium, plan, would as just have to program on want once smaller think an significantly. an would be think, in-force cost I if want. And reinsurance. What be policies, this for you smaller shrink relaunch think expense opportunity that reinsurance might to book cost program reinsurance $XXX when a again, new

once We're in we our trying regulators, So approved. and having a nothing situation. as to we're has move been dialogue with best difficult forward can again,

Doug Ruth

and question Okay. beyond any events -- the quarter normal? concerned Has grateful to questions. then be my the or what And there about and answers above progressing? to for weather be been How last is anything is might I'm significant these current

Mike Braun

Yes.

of a if And March, define been -- In it more terms of not active we the of lot sure or have had how many weather. QX, decade a but could March, plus, you one in decades. not I'm months,

first here. of May, month the quieter. only much roughly is days April XX the it's So

is shrinking significantly. But we've some absolutely. every So day, our weather, portfolio had

bring to specific nothing up. So

at policies. in are As a continues I just XXX talk I specific more a not significant roughly just when just QX, average. lot less on believe to look on it's day. lot earn in passing force rate reduction these policy. in about A each we XXX but policies in a per month day policies with to That's number, dropping aggregate, the we're

have So reinsurance as high there challenge a once when again, our there. that you is you made cost, downsizing. of shrink in we've lot progress But some

Doug Ruth

we're Well, Okay. grateful for year going the and to the for questions, hoping the answers best I'm forward.

Mike Braun

Have All right. a day. you. good Thank

Operator

I'm any in to I'd turn management remarks. the like showing additional conference to queue Thank no you. time. closing back over this the at questions for

Mike Braun

for you participating on Thank all today's call.

agents, to Before the we in close, -- partner want our to I our recognize to work and They the hard exceptional provide time by and dedication service need. of by ongoing team. to their continue particularly FedNat policyholders

So day. just for and wanted everyone their wish to good a thank them efforts

much. very you thank So

Operator

participating concludes Ladies and This program. today's the you conference. gentlemen, thank for in

disconnect. Everyone, now day. a may have You wonderful

FedNat Holding (FNHCQ) 14 May 222022 Q1 Earnings call transcript